This little-known scheme can help first home buyers save thousands more for a deposit, with less tax

Saving for a first home is already hard enough. So when a federal budget change appears to make some popular savings strategies less attractive, it is no surprise people are worried.

Since last week’s budget, concern has centred on young Australians who are using shares or exchange-traded funds (ETFs) to save for a home deposit. About one in ten people under 35 own shares, according to Treasurer Jim Chalmers.

The worry is that changes to the capital gains tax (CGT) will reduce after-tax returns and slow their progress. The government plans to replace the 50% CGT discount with an inflation-based discount and introduce a minimum 30% tax on gains.

It is true that tax settings affect after-tax returns, and after-tax returns affect how quickly a deposit grows.

But the current debate overlooks a little-known savings option set up a decade ago for this exact purpose: the First Home Super Saver scheme (FHSS).

The name is clunky, but the idea is simple. The scheme was designed specifically to help first-home buyers save through their superannuation.

How the super scheme works

The First Home Super Saver scheme lets eligible buyers make voluntary contributions to super and later apply to withdraw eligible contributions, plus associated earnings, to buy or build a first home.

The “voluntary” part matters. This is not a way to withdraw compulsory employer Super Guarantee contributions. It only applies to extra contributions made before tax, such as salary sacrifice, or after tax as personal contributions.

There are limits. You can count up to A$15,000 of voluntary contributions each financial year, up to $50,000 in total. Couples, friends or siblings who are each eligible can each use their own First Home Super Saver scheme savings toward the same property.

Where the tax advantage comes from

The main attraction of saving with this scheme is the tax benefit.

If you salary sacrifice into super, those concessional contributions are generally taxed at 15%. For many workers, that is lower than their marginal income tax rate.

Take a worker whose marginal tax rate, including Medicare levy, is 32%.

If they take an extra $10,000 as salary, they pay 32% tax and are left with about $6,800 to save outside super for a first home.

If they salary sacrifice the same $10,000 into super, the contributions tax of 15% is deducted, leaving them with $8,500.

When they later withdraw that amount under the First Home Super Saver scheme, the tax due is broadly their 32% marginal rate, minus the 30% offset — or about 2%. That leaves about $8,330, before investment earnings, fees or other adjustments, towards their home deposit.

So, in this simplified example, using this scheme leaves the saver about $1,530 better off than taking the money as salary and saving it outside super.

The result is not magic. It is the effect of using super’s concessional tax treatment for a purpose the scheme specifically allows.

It is useful, but you need to know the rules

The First Home Super Saver scheme can help, but it should not be oversold.

The federal government’s 2026 State of the Housing System report found the time needed to save a 20% home deposit rose from nine years in 2015 to 11.2 years in 2025.

A $50,000 cap can make a meaningful difference, especially if two eligible buyers combine their savings using the super scheme. But it will not close the deposit gap for everyone.

There are eligibility and timing rules, too. You generally need to be at least 18 to request a release, have never owned property in Australia before (unless a hardship exception applies), and intend to live in the home.

You must also request a determination from the scheme before any property is transferred to you, which tells you the maximum amount you can release under the scheme.

The main practical trade-off is flexibility. Money in a savings or investment account can be redirected if plans change. Money contributed to super is harder to access, unless the scheme rules are met.

If your plans change, you need to understand the rules before putting extra money in.

First home buyers should check all the options

None of this means shares or ETFs are a bad way to save. They may suit people who want more flexibility, are not yet sure whether they will buy a home, expect to save beyond the annual caps in the First Home Super Saver scheme, or do not meet the scheme’s eligibility rules.

But the debate should be broader than “shares versus savings account”. For eligible first-home buyers, the better question is whether part of the deposit strategy should run through super.

The current capital gains tax debate is an opportunity to revisit a scheme few people are aware of or understand. It will not solve Australia’s housing affordability problem.

But in a market where saving a deposit takes longer than ever, a tax-advantaged accelerator like the First Home Super Saver scheme deserves more attention.

Read more: A budget with a bundle of reforms in a time of ‘extreme uncertainty’

Disclaimer: This article provides general information only and is not intended as financial advice.